Electronic Indian Musical instruments not exempted under Tamil Nadu GST Act

M/S Radel Electronics Pvt. Ltd. vs. The Government of Tamil Nadu & Anr.; W.P. 16505 to 16598 of 2008; Madras High Court; 03.09.2021

The writs under consideration were filed challenging the validity of two notifications of the government on exemption of tax on Indian Musical instruments by invoking invoking Section 17 of the Tamil Nadu GST Act. The first notification granted exemption on Indian musical instruments and the second was a clarification specifically enumerating the instruments which were exempted under the previous notification. It was held that the electronic instruments were not exempted vie the said notifications. The said exemptions were granted only for the welfare of the poor artisans.

Facts:

• Petitioner is a Pvt. Ltd. Company incorporated under the Companies Act, 1956 and having its Registered Office at Bangalore and engaged in the manufacture and sale of Indian Musical Instruments.
• Petitioner had claimed exemption on the sales of the Indian Musical Instruments in terms of G.O.Ms.No.45/CT(B2) dated 12.02.2004, which exempted sales of Indian Musical Instruments. The said Notification reads that “exemption in respect of tax payable by any dealer on the sale of Indian Musical Instruments”. Thus, any item which qualifies as Indian Musical Instrument is eligible for exemption. The said Notification does not impose any further condition such as the composition of the instrument or the source/mode of operation of the instrument to qualify for the exemption.
• However, the subsequent notification G.O.Ms.No.193 (CT & R (B2) dated 30.12.2006 narrows down the benefit conferred by the previous notification, exempted all Indian Musical Instruments, and restricts it only to the items enumerated in the said subsequent Notification.

Petitioner’s Contention:

• The Notification issued on 30.12.2006, curtailing and whittling down the benefit is made retrospectively by the delegatee viz., the State Government, which is clearly beyond the scope of its power conferred under Section 17 of the TNGST Act from 12.02.2004.
• the manner in which the impugned Notification was issued classifying the Indian Musical Instruments is in violation of Section 17 itself.
• In view of the impugned Notification dated 30.12.2006, the respondents have issued the impugned notice proposing to reject the petitioner’s claim of exemption by placing reliance on G.O.Ms.No.193, dated 30.12.2006 on the ground that the said Notification is a clarification and therefore, it is to be applied from the date of the original Notification on 12.02.2004.
• It is not stated whether the Indian Musical Instrument is manufactured either electronically or manually. In the absence of any such specific description in the Act, there is no reason for denying the benefit of exemption granted by the Government, especially for the Indian Musical Instruments. Therefore, Indian Musical Instruments manufactured electronically are also eligible to be classified as Indian Musical Instruments and therefore, the petitioner is entitled for exemption from payment of tax.

Respondent’s Contention:

The exemption is provided to encourage the poor artisans, who are engaged in the manufacturing of those instruments from generation to generation, who are normally living in penurious circumstances. Also, the exemption is provided to make available within the reach of poor and needy artisans, so as to develop the traditional Indian Music as far as possible, which is synonymous of Indian culture and tradition.

In these cases, the petitioner-Company having their manufacturing facility at Bangalore are manufacturing and selling electronic Musical Instruments. All the Musical Instruments manufactured and sold by the petitioner were electronically operated Indian Musical Instruments and they have not sold any Indian Musical Instruments other than as operated by electronic musical system.

Observations:

• Perusal of both Notifications would reveal that both are relatable to Indian Musical Instruments. However, in the first Notification, the details/classification of Indian Musical Instruments have not been provided and in the subsequent Notification, it is clearly stated that the exemption in respect of the tax payable by any dealer under the said Act on the sale of Indian Musical Instruments namely, Veena, Violin etc. Thus, the subsequent Notification dated 30.12.2006 is only in the nature of clarification to understand what all the instruments are falling under the head of ‘Indian Musical Instruments’.
• The benefit of exemption is not taken away and the benefit of exemptions conferred in Notification G.O.Ms.No.45 remains intact. The subsequent Notification was issued on 30.12.2006 enumerating the list of instruments which all are falling under the category of Indian Musical Instruments. Thus, the impugned notice dated 30.12.2006 cannot be construed as if an alteration made in respect of the exemption granted in Notification G.O.Ms.No.45
• It was rightly pointed out by the departments that the State has not intended to grant exemption in respect of large scale manufacturers of electrically made Indian Musical Instruments. Such Indian Musical Instruments, which all are using the electronic technologies, then it is to be classified as electronic instruments, which would squarely fall under 14(iv) of Part D of the First Schedule of TNGST Act, 1959.
• This apart, when tax liability is fixed for electronic instruments, it is to be construed that Indian Musical Instruments electrically manufactured is to be classified as electronic instruments.
• At the outset, whether it is Indian Musical Instruments or any other instruments, if it is an electronic instrument, then the same would fall under the further classification of “electrical instruments” and cannot be construed as traditionally manufactured Indian Musical Instruments, for which exemption was granted with the specific intention to grant the relief to poor artisans, who all are engaged in the manufacturing of these instruments from generation to generation and living in penurious circumstances in the State.
• Tax exemption is a concession. Thus, exemption from payment of tax can never be claimed as a matter of right. Exemptions are to be granted strictly in consonance with the provisions of the Act. Thus, purposive and contextual interpretation of exemption provisions are imminent for the purpose of extending the benefit of exemption.
• The Government is vested with the power to grant exemption and such exemptions are to be granted in judicious manner. Power of exemption is conferred in order to minimise the inequality and to mitigate the unjust circumstances and to ensure that the Constitutional principles are achieved to the extent possible. Thus, exemptions granted under any Statute is to be measured with reference to the Constitutional principles and its perspectives. Excessive or erroneous exercise of power of exemption undoubtedly would lead to unconstitutionality. The State is duty bound to ensure that exemptions are granted to mitigate the unjust circumstances and to remove the injustice in a particular issue.
• Thus, exemptions cannot be granted in a routine manner, so as to facilitate the large scale manufacturers to gain profits in an unjust manner. The Legislative intention of conferring power of exemption to the Government is to enforce the Constitutional principles of social justice equality in status amongst the citizen, including the economic status, which all are to be achieved.
• The power of exemption is to be utilised for the upliftment of the depressed, oppressed and the poor class of people and not for the purpose of granting benefit to the large profit making organisations. Thus, any abuse or excessive grant of exemption is to be construed as opposed to public policy under the Constitutional philosophy.

Held:

Exemptions granted by invoking Section 17 of the TNGST Act, remains as it is in respect of Indian Musical Instruments and the impugned Notification dated 30.12.2006 in G.O.Ms.No.193 was issued to clarify the Indian Musical Instruments, which all are falling under the exemption clause notified in G.O.Ms.No.45, dated 12.02.2004 and therefore, the subsequent Notification is a clarificatory in nature and cannot be construed as cancellation of the exemption granted in G.O.Ms.No.45, dated 12.02.2004. The Hon’ble High Court therefore held that the writ petitions were devoid of any merit and therefore were dismissed the same.